Question 1

Federal Reserve governors are given long terms to insulate them from politics.

Accepted Answer

A) True 
 B)False

Question 2

Table 29-2.An economy starts with $10,000 in currency.All of this currency is deposited
into a single bank,and the bank then makes loans totaling $9,250.The
T-account of the bank is shown below.
 
-Refer to Table 29-2.If all banks in the economy have the same reserve ratio as this bank,then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

Accepted Answer

A)   $866.67.
B)   $1,666.67.
C)   $2,000.00.
D)   an infinite amount.

Question 3

Which of the following is not included in M1?

Accepted Answer

A)   currency
B)   demand deposits
C)   savings deposits
D)   travelers' checks

Question 4

Which of the following lists two things that both increase the money supply?

Accepted Answer

A)   the Fed buys bonds and lowers the discount rate
B)   the Fed buys bonds and raises the discount rate
C)   the Fed sells bonds and lowers the discount rate
D)   the Fed sells bonds and raises the discount rate

Question 5

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent,this action by itself initially makes the money supply

Accepted Answer

A)   and wealth increase by $100.
B)   and wealth decrease by $100.
C)   increase by $100 while wealth does not change.
D)   decrease by $100 while wealth decreases by $100.

Question 6

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Accepted Answer

A) True 
 B)False

Question 7

Monetary policy affects employment

Accepted Answer

A)   only in the long run.
B)   only in the short run.
C)   in both the long run and the short run.
D)   in neither the long run nor the short run.

Question 8

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)   adjustments to long-term interest rates
B)   open-market operations
C)   changes in reserve requirements
D)   changes in the discount rate

Question 9

Imagine that the federal funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Accepted Answer

A)   buy bonds.This buying would increase the money supply.
B)   buy bonds.This buying would reduce the money supply.
C)   sell bonds.This selling would increase the money supply..
D)   sell bonds.This selling would reduce the money supply..

Question 10

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Accepted Answer

A)   the Board of Governors
B)   the FOMC
C)   the regional Federal Reserve Bank presidents
D)   the Central Bank Policy Commission

Question 11

Which of the following is included in M2 but not in M1?

Accepted Answer

A)   demand deposits
B)   corporate bonds
C)   large time deposits
D)   money market mutual funds

Question 12

Table 29-4.
The First Bank of Wahooton
 
-Refer to Table 29-4.If the bank faces a reserve requirement of 20 percent,then it

Accepted Answer

A)   has $10,000 of excess reserves.
B)   needs $10,000 more reserves to meet its reserve requirements.
C)   needs $5,000 more reserves to meet its reserve requirements.
D)   just meets its reserve requirement.

Question 13

If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Accepted Answer

A)   would increase.
B)   would not change.
C)   would decrease.
D)   could do any of the above.

Question 14

Which of the following entities actually executes open-market operations?

Accepted Answer

A)   the Board of Governors
B)   the New York Federal Reserve Bank
C)   the Federal Open Market Committee
D)   the Open Market Committees of the regional Federal Reserve Banks

Question 15

Table 29-5.
Bank of Kopeka
 
-Refer to Table 29-5.Assume there is a reserve requirement and the Bank of Kopeka is exactly in compliance with that requirement.Assume the same is true for all other banks.Lastly,assume people hold only deposits and no currency.What is the money multiplier?

Accepted Answer

A)   5
B)   10
C)   15
D)   20

Question 16

Today,bank runs are

Accepted Answer

A)   uncommon because of the high reserve requirement.
B)   uncommon because of FDIC deposit insurance.
C)   common because of the low reserve requirement.
D)   common because the FDIC is nearly bankrupt.

Question 17

In early 2008,the Federal Reserve

Accepted Answer

A)   announced that it was temporarily suspending its practice of making loans available to banks.
B)   declared that the credit crisis,which had recently resulted in severe financial-market problems,had come to an end.
C)   took actions to prevent the imminent bankruptcy of JP Morgan Chase,a bank.
D)   took actions to prevent the imminent bankruptcy of Bear Stearns,an investment bank.

Question 18

Suppose a bank's reserve ratio is 10 percent and the bank has $2,000 in deposits.Its reserves amount to

Accepted Answer

A)   $20.
B)   $200.
C)   $400.
D)   $1,800.

Question 19

To increase the money supply,the Fed could

Accepted Answer

A)   sell government bonds.
B)   increase the discount rate.
C)   decrease the reserve requirement.
D)   None of the above is correct.

Question 20

An increase in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds in an attempt to increase the federal funds rate.
B)   purchased bonds in an attempt to reduce the federal funds rate.
C)   sold bonds in an attempt to increase the federal funds rate.
D)   sold bonds in an attempt to reduce the federal funds rate.

Exam 29: The Monetary System

Today,bank runs are

Correct Answer
verified

An increase in the money supply might indicate that the Fed had

Correct Answer
verified

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Correct Answer
verified

Monetary policy affects employment

Correct Answer
verified

Which tool of monetary policy does the Federal Reserve use most often?

Correct Answer
verified

Suppose a bank's reserve ratio is 10 percent and the bank has $2,000 in deposits.Its reserves amount to

Correct Answer
verified

To increase the money supply,the Fed could

Correct Answer
verified

Correct Answer
verified

Federal Reserve governors are given long terms to insulate them from politics.

Correct Answer
verified

Which of the following entities actually executes open-market operations?

Correct Answer
verified

Which of the following is not included in M1?

Correct Answer
verified

In early 2008,the Federal Reserve

Correct Answer
verified

Table 29-5. Bank of Kopeka -Refer to Table 29-5.Assume there is a reserve requirement and the Bank of Kopeka is exactly in compliance with that requirement.Assume the same is true for all other banks.Lastly,assume people hold only deposits and no currency.What is the money multiplier?

Correct Answer
verified

Which of the following lists two things that both increase the money supply?

Correct Answer
verified

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Correct Answer
verified

Which of the following is included in M2 but not in M1?

Correct Answer
verified

Table 29-4. The First Bank of Wahooton -Refer to Table 29-4.If the bank faces a reserve requirement of 20 percent,then it

Correct Answer
verified

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent,this action by itself initially makes the money supply

Correct Answer
verified

Imagine that the federal funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Correct Answer
verified

If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Correct Answer
verified

Exam 29: The Monetary System

Today,bank runs are

Correct AnswerverifiedShow Answer

An increase in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

Correct AnswerverifiedShow Answer

Monetary policy affects employment

Correct AnswerverifiedShow Answer

Which tool of monetary policy does the Federal Reserve use most often?

Correct AnswerverifiedShow Answer

Suppose a bank's reserve ratio is 10 percent and the bank has $2,000 in deposits.Its reserves amount to

Correct AnswerverifiedShow Answer

To increase the money supply,the Fed could

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Federal Reserve governors are given long terms to insulate them from politics.

Correct AnswerverifiedShow Answer

Which of the following entities actually executes open-market operations?

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

In early 2008,the Federal Reserve

Correct AnswerverifiedShow Answer

Table 29-5. Bank of Kopeka -Refer to Table 29-5.Assume there is a reserve requirement and the Bank of Kopeka is exactly in compliance with that requirement.Assume the same is true for all other banks.Lastly,assume people hold only deposits and no currency.What is the money multiplier?

Correct AnswerverifiedShow Answer

Which of the following lists two things that both increase the money supply?

Correct AnswerverifiedShow Answer

In the months of November and December,people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays.As a result,other things the same the money supply increases.

Correct AnswerverifiedShow Answer

Which of the following is included in M2 but not in M1?

Correct AnswerverifiedShow Answer

Table 29-4. The First Bank of Wahooton -Refer to Table 29-4.If the bank faces a reserve requirement of 20 percent,then it

Correct AnswerverifiedShow Answer

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent,this action by itself initially makes the money supply

Correct AnswerverifiedShow Answer

Imagine that the federal funds rate was above the level the Federal Reserve had targeted.To move the rate back towards it's target the Federal Reserve could

Correct AnswerverifiedShow Answer

If the central bank in some country lowered the reserve requirement,then the money multiplier for that country

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified